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Digital giants drive cross-industry disruption
Kathy Gibson reports from Gartner Symposium in Cape Town – As digitalisation, or platform business, becomes the business norm, digital giants like Google, Apple and Amazon are becoming major players in industries traditionally dominated by other, established organisations.
Daryl Plummer, vice-president and Gartner fellow, explains that platform ecosystems are as critical to business success as IT systems.
“We are living in a digital world,” he says. “It’s not just about being on the Web, or being online. That is not a digital strategy.
“Being digital is about blurring the distinctions between the physical and virtual worlds.”
While e-commerce and e-business layered a new level on top of the existing business processes, digital business changes the actual business and business processes.
Plummer points to Amazon’s journey as first an e-commerce business, then later as a digital business as it eliminated the need for physical books at all.
The transition affects the whole ecosystem and now a number of businesses in the supply chain have been bypassed.
In the digital world, every person and thing would be connected, allowing people to control real world devices from a digital foundation.
“There is a difference between digitising and digitalisation,” Plummer says. “Digitising is the processes of creating 1s and 0s. Digitalisation is about giving people control of their environment.”
Plummer stresses that this affects every part of the ecosystem – it won’t just affect the outcome, but every process on the way.
“So everything will have a digital twin, and whatever we do with one reflects on the other.”
We already have digital social networks, digital search and more. The digital giants are hoping they will be able to tap back into the information thus generated, Plummer says.
And the problem with this, he adds, is that many of the apps are now being written everywhere, and aggregated by the digital giants.
No organisation can hope to write all the apps they can use; they have to tap into the ecosystem to get access to the wealth of IP out there.
“If someone has already built a component, why should I do it? And the market will tell us which will survive and which will go away.
“What I have to decide is which digital giant’s hub I want to get into.”
Scaling up what’s happening in the consumer world into the enterprise enables a B2B ecosystem, Plummer adds.
So products are delivered through the platforms and plumbing then via apps and software, with the digital giants as the single face to the customer.
This ecosystem is enabled by the opening up of APIs. “So don’t make the mistake of locking up your systems because you think you have to protect your data. You have to open up your APIs to allow others to create apps, who will create things you never thought you could.
“Locking away your IP would be bad.”
Enterprises still have to think about the digital giants, and decide how to deal with them
“There are two options: to join them or to compete against them.”
Plummer cites the example of a GE-built in-car entertainment systems – but it worked only with GE; and often didn’t connect to the users’ phones.
“A better way to go is a car entertainment ecosystem. It allows any car manufacturer to plug in.
“Now, it doesn’t matter if we are at home, at work or in the car – we can play our same music.”
Meanwhile, Apple and Epic are building a healthcare ecosystem.
Public transport, on the other hand has been at the forefront of mashups – mostly using Google Maps at almost zero cost to the taxpayer.
“You have to think from a business perspective about what can be done for nothing – and for the city of New York it was using Google Maps.”
For businesses planning to join someone else’s ecosystem, Plummer offers this advice:
* Be clear about the business model – even if no money is exchanged with digital ecosystem leaders.
* Join multiple ecosystems – but not all.
* Set boundaries for how far you will let the digital giants overlap your space.
The other option is to compute against the digital giants, Plummer says.
“The first thing you need to have if you want to compete is something that you can compete with.
“That’s great if you have enough money and a strong enough brand – you can buy your way in.”
Another strategy could be to create an open ecosystem that will allow others to add their apps. This has been seen with Toyota and its Smart Device Link.
Goldman Sachs has given out its secret algorithms on trading, allowing more companies to use the algorithms, which allows more money to flow through the system.
“Tesla shared their turbine engine design to see if people would help them to make it better and faster.”
Companies must ask themselves if they have what it takes to be a digital ecosystem:
* Leverage your very strong brand or captive audience to attract a critical mass of customers and partners.
* Digitalise goods, services or value so that they can be aggregated traded and shared
* Be a leader that enforces standards, quality and rules of engagement in the ecosystem
* Create a simple and consistent experience that aggregates many disparate parts for customers
* Create fertile ground for multi-sided markets – because ecosystems employ more than supply-demand style markets.
Plummer believes a couple of dynamics will exist in in the new B2B ecosystem. They are drivers, partners and market makers.
In the ecosystem world, it’s still not sure who the leaders will be and what their roles will be. They then need to decide on business models. And whether or not they will acquire an organisation
“This stuff is not hard. What is hard to believe is that it is happening – and it is working,” he adds.